Rise of bad loans in Slovenian banks slows -govt institute

Reuters Staff

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LJUBLJANA, May 14 (Reuters) - Bad loans in Slovenian banks, which almost forced the country to ask for outside help last year, are still rising but at a slower pace than they have for the past four years, the government’s macroeconomic institute said on Wednesday.

In December, the government injected some 3.3 billion euros of its own funds into local banks that were weighed down by toxic loans. The funding enabled the country to narrowly avoid an international bailout.

“The formation of new provisions for bad loans remains at a low level. It reached only 30 million euros in the first two months of this year ... and was lower than in the past four years,” the institute said in its monthly report.

Bad loans at local banks amounted to 5.8 billion euros, or 13.9 percent of all loans, at the end of February, it said.

The bad loans had stood at some 9 billion euros before the overhaul in December. About 3.5 billion euros of those loans from the two largest banks - Nova Ljubljanska Banka and Nova KBM - have already been transferred to a state “bad bank”.

Bad loans worth some 543 million euros from the country’s third-largest bank, Abanka Vipa, are due to be transferred to the bad bank in the coming months.

Unlike most other ex-communist countries in eastern Europe, Slovenia has refused to sell its largest banks, so the government still controls most of the local banking sector, which accumulated a large amount of bad loans through years of reckless lending.

The government hopes to privatise NKBM by the end of next year. (Reporting By Marja Novak; Editing by Zoran Radosavljevic and Larry King)